We told you months ago to watch Massachusetts’s Medicaid drug pricing proposal, which would have allowed the state to create a drug formulary and thus exclude certain drugs from its coverage as a way of negotiating lower prices from drug makers.
It was an important test for the Trump administration, an up-or-down decision about how far it was willing to go in its promise to bring down drug prices.
We now have our answer: thumbs down. The Massachusetts plan is not something Trump officials are going to approve, they informed the state in a recent letter.
But there was something about the Trump administration’s letter that struck experts who have been watching the Massachusetts waiver as odd: They didn’t really explain very clearly why they wouldn’t approve the state’s proposal.
”The important thing is they really didn’t deploy a rationale,” Rachel Sachs, a law professor at Washington University in St. Louis, told me. “They do not explain why legally they couldn’t grant the waiver.”
”You could read that one of two ways,” she continued. “Either they actually think it is legal and they’re simply choosing to deny it anyway ... or they don’t want to say explicitly what their legal argument is because that would give [Massachusetts] a hook to argue in court.”
The Trump administration did outline alternative circumstances under which it would approve the Massachusetts plan: The state would have to give up the legally mandated discounts that Medicaid programs receive from drug manufacturers.
That is a huge ask. Massachusetts would then have to negotiate prices from scratch and, because Medicaid state waivers are required to be budget neutral, the state would have to on net negotiate lower prices than it would have received with the typical Medicaid rebates.
”It’s very hard to see how a state would be able to save money without really significant restrictions on patient access,” Sachs said. “They’ve significantly elevated the administrative burdens on any state seeking to do this.”
An oversimplified way to think about it: Let’s say Drug A costs $100. The mandated Medicaid discount is $20. So in order to actually save any money — and to meet the budget neutrality requirement — the state would need to negotiate a $21 discount.
Whereas if the state were able to keep the rebates, and negotiate from there, it would just need to save a single dollar for a single drug in order to realize savings and be budget neutral. Or if Massachusetts excluded just a single drug from its new formulary — maybe one with less evidence of its effectiveness — you would have savings.
What’s more, Sachs said, Trump administration officials “also do not explain why in their view either the law requires the system they want to propose or why it would be better.”
Sachs contrasted this rigidity from the Trump administration on a state’s proposal to lower drug prices with their overeagerness to allow states to institute work requirements and other restrictions on Medicaid benefits. She summed up:
They’ve bent over backwards to approve work requirements and make it easier for states to exercise many flexibilities to kick people off Medicaid.
But when it comes to the interests of the pharmaceutical industry, all of a sudden the government is very worried about giving states the same kind of flexibility.
That should be concerning, especially because it won’t explain its reasoning.
This story appears in VoxCare, a newsletter from Vox on the latest twists and turns in America’s health care debate. Sign up to get VoxCare in your inbox along with more health care stats and news.
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